BUDGET GROWTH SLOW BUT STEADY, AUDIT SAYS

City ends fiscal year with surplus of about $400,000; property values are still rising

Del Mar ended its last fiscal year firmly in the black, in a continued pattern of slow and steady fiscal growth, officials heard at a meeting last week where the results of the city’s 2011-12 fiscal year audit were released.

General fund revenue increased by about $350,000, hitting $11.5 million — up from roughly $11.1 million the previous year.

Expenses also increased, but the city still took in more than it spent. Del Mar ended the fiscal year with a roughly $400,000 surplus.

For the current fiscal year — which started July 1 and ends June 30 — the city is estimating revenue of about $10.5 million, a conservative projection. Del Mar estimated about $10.5 million in revenue for 2011-12 and exceeded that number by about $1 million.

“We ended with a surplus and added to fund balance,” said City Manager Scott Huth. “That’s always a good position to be in.”

Del Mar’s budget received a gold star last week when auditors praised the seaside city for its scrupulous record keeping and continuing to add to its bottom line.

At Monday’s meeting, Ken Al-Imam, a representative with auditing firm Mayer Hoffman McCann, ran through the highlights of the city’s 2011-12 audit. This is the fourth year the city has worked with the company.

Sales tax, property tax and the transient occupancy tax — a tax paid by visitors on the price of hotels — all went up and property values continued to rise, Al-Imam said.

“This is in stark contrast to most of the cities that we audit where there has actually been a decline … not so for Del Mar,” he said about the community’s property values.

Additionally, auditors didn’t have a single improvement to suggest when it came to the city’s books.

“When I met with the finance committee, I mentioned how rare it is to have a situation where we don’t have deficiencies to comment on,” Al-Imam said. “Most of my clients have at least two or three.”

Jim Benedict, a member of the finance committee, said the budget breakdown illustrated the good and bad of the small community’s financial picture.

While the city’s sales tax totals went up, the numbers are still low, he said. Big sales-tax generators such as car dealerships and grocery stores just aren’t going to fit in the largely built-out town, Benedict said.

Most of the city’s revenue, more than 50 percent, comes from property values.

In Del Mar, property values have mostly risen, a definite boon considering that many cities have struggled with deflated housing markets since the real-estate crash.

“By not being dependent on sales tax, our budget looks pretty consistent,” Benedict said. “It’s growing at a steady rate and from city staff’s perspective you can make a real predictable budget. That makes planning easier, for better or for worse.”

Benedict said the city budget continues to grow by about 2 percent every year and he doesn’t see that changing any time soon. But without many revenue resources, the city has to pay extra attention to its costs to stay on budget.

“And costs have literally exploded over the years,” Benedict said.

The finance committee will be taking a hard look at the city’s pension program and has already begun work on a public safety alternative to the current Sheriff’s Department contract — two big drains on Del Mar’s $10 million budget.

Bud Emerson, another member of the finance committee, took a different tack from Benedict when talking about the budget. In Emerson’s eyes, the city has a giant source of revenue it is not fully capitalizing on — visitors.

“I really think we should be looking at more opportunities to raise revenues from visitors who come here and expect services,” Emerson said.

Visitors flock to the city for beaches, hotels and vacation rentals.

“There’s a whole segment of the community that is taking advantage of what the city has to offer and isn’t paying its fair share,” said Emerson.

Years ago, Del Mar debated another Proposition J. Instead of downtown revitalization, this ballot measure explored taxing visitors who rented vacation homes and apartments, a practice already implemented by nearby cities like Carlsbad, Solana Beach and Encinitas. It was defeated, but he wouldn’t mind seeing the issue revisited.

“It’s not just about expenditures,” Emerson said of the budget. “It’s about revenues as well.”

City Manager Scott Huth said staff would continue to take a conservative approach as it slowly works toward some of the city’s more expensive goals — like revitalizing City Hall and revamping the Shores Park property.

“We’re a long ways from being in a situation where we could classify the city as having enough resources to accomplish all our projects needs and goals,” he said.

“But we are in a position to fulfill our current needs and we are starting to chip away at those infrastructure goals of the community.”